Signal transduction by insulin and IGF-1, and other cytokines involves insulin receptor substrate (IRS) proteins, which link receptors for these factors to signaling molecules with SH-2 domains. We recently reported the amino acid sequence of murine IRS-2; in order to examine a potential genetic role for this molecule in disease, we isolated the murine IRS-2 gene and compared the expression pattern of IRS-2 against IRS-1. Like IRS-1, IRS-2 is encoded by a single exon. Whereas IRS-1 is located on murine chromosome 1, IRS-2 is located on murine chromosome 8 near the insulin receptor. IRS-2 is expressed together with IRS-1 in many cells and tissues. However, IRS-2 predominates in murine hematopoietic cells where it may be essential for cytokine signaling; IRS-1 predominates in adipocytes and differentiated 3T3-L1 cells where it contributes to the normal insulin response. In 32D cells, IRS-1 and IRS-2 undergo differential tyrosine phosphorylation during insulin or IL-4 stimulation, as assessed indirectly by interaction with various recombinant SH2 domains. Thus, signaling specificity through the IRS proteins may be accomplished by specific expression patterns and distinct phosphorylation patterns during interaction with various activated receptors. We also, we examined the expression and function of IRS-1 and IRS-2 in adipocytes from healthy and diabetic individuals. IRS-1 was the main docking protein for PI 3-kinase in adipocytes from healthy subjects. However, in adipocytes from non-insulin-dependent diabetes mellitus (NIDDM) subjects. IRS-1 protein content was markedly reduced and IRS-2 became the main docking protein. Binding of PI 3- kinase to IRS-2 required a higher insulin concentration than that needed for a similar binding to IRS-1 and this may be a key factor for the insulin resistance in NIDDM.